Standard Chartered Slashes ETH Price Target by 60%—Blames Layer 2s for Ethereum’s Struggles

Edyme

March 18, 2025

Standard Chartered’s revised ETH forecast cuts its price target from $10,000 to $4,000, citing Ethereum’s evolving market dynamics

Standard Chartered has lowered its 2025 price target for Etherum (ETH) from $10,000 to $4,000, citing the growing dominance of Layer 2 networks, particularly Base, as a key reason.

Analyst Geoffrey Kendrick argues that Ethereum's Layer 2 expansion has eroded its market cap and that without economic reforms, ETH may continue underperforming against Bitcoin.

Background

Standard Chartered’s revised ETH forecast cuts its price target from $10,000 to $4,000, citing Ethereum’s evolving market dynamics.
According to Geoffrey Kendrick, the bank’s global head of digital assets research, Ethereum has “commoditized itself” by enabling Layer 2 networks to extract significant value from the ecosystem.
Kendrick estimates that Base, the Coinbase-incubated Layer 2, alone has removed $50 billion from Ethereum’s market cap by shifting activity away from the Layer 1 chain.
Ethereum’s structural changes over recent years, including The Merge and Dencun upgrade, have empowered Layer 2s but reduced direct revenue to Ethereum’s mainnet.
Base directs all its profits to Coinbase, creating "super-profits" for its corporate owner, further raising concerns about Ethereum’s value retention.
While Ethereum still dominates the DeFi sector, stablecoins, and tokenized assets, its market share has been declining.

Why should you pay attention?

Ethereum’s fee model is under scrutiny, as Layer 2s capture transaction activity without contributing directly to the Ethereum mainnet’s economic value.
If Ethereum cannot adapt to the growing power of Layer 2s, its long-term revenue and sustainability could be at risk.
Ethereum’s next major upgrade, Pectra (expected in 2025), may help address scalability and fees, but Kendrick warns that without economic restructuring, ETH may continue underperforming against BTC.
Kendrick suggests that taxing Layer 2s, similar to how governments tax foreign mining firms, could be a solution—but he believes this is unlikely to happen.
Despite the short-term downgrade, Standard Chartered still expects ETH to reach $7,500 by 2028-2029, though it predicts the ETH/BTC ratio will fall to its lowest level since 2017.

Who said what?

Geoffrey Kendrick, Standard Chartered’s head of digital assets research, stated:

“We estimate that Base has removed $50 billion of market cap from Ethereum alone.”

He also suggested a controversial potential fix:

“The solution would be to tax Layer 2 super-profits, similar to how governments charge super taxes for foreign-owned mining companies. Unless that happens, ETH-BTC will keep going down.”

A Base spokesperson defended Layer 2 networks, arguing that they help Ethereum’s growth:

“Base makes getting onchain more accessible with fast and cheap transactions and helps grow the Ethereum ecosystem by onboarding more users, builders, apps, and assets.”

Despite Ethereum’s struggles, Kendrick acknowledged its continued dominance in key areas:

“Ethereum still leads in tokenized real-world assets, where it holds an 80% market share.”

Zooming out

Ethereum is at a crossroads, balancing the benefits of Layer 2 scalability with the risk of eroding its mainnet’s economic value.
The dominance of Base and other Layer 2s raises questions about Ethereum’s long-term sustainability, as more activity moves off-chain while Ethereum bears the infrastructure costs.
This debate extends beyond Ethereum, as other blockchain ecosystems may face similar challenges as they scale.The Ethereum Foundation could consider economic reforms, but major changes—such as taxing Layer 2 networks—would be controversial and difficult to implement.
While Ethereum’s growth trajectory on-chain remains strong, the question now is whether its current model is sustainable—or if a structural shift is needed to maintain long-term value.